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WPP ACQUISITION OF GREY BACK ON TRACK

European Regulators Expected to Rule by Late January

NEW YORK (AdAge.com) -- WPP Group's acquisition of Grey Global Group, delayed by an antitrust review in Europe, is back on track, with the European Union expected to rule on the deal by Jan. 24. Assuming the deal clears that hurdle and Grey shareholders then approve the merger, WPP could complete the deal in the early part of 2005.

Unexpected roadblock
WPP and Grey initially hoped to wrap the merger around yearend, and the deal won quick antitrust clearance from U.S. regulators. But it hit an unexpected roadblock Nov. 22 when the European Commission asked for additional information.

The companies haven't revealed what the commission's concerns were, but people close to the situation said the commission had questions about the European media-buying clout of the combined WPP (parent of media agencies MindShare, Mediaedge:cia) and Grey ( MediaCom).

The clock for European approval restarted when WPP refiled its merger application. The commission now has until Jan. 24 to complete a "Phase I" review.

Phase II investigation
After that review, the commission has the option to do a broader "Phase II" investigation that could take an additional period of up to 90 business days. That's unlikely, however. Paul Richardson, WPP's group finance director, noted in September that past WPP deals had all received European antitrust clearance at the Phase I stage. He added: "We've never been taken to stage two in the past and don't expect to, but there's always a possibility."

Still, WPP has bought itself some time: WPP and Grey early this month extended the termination date of the deal by two months, to Aug. 11. If the merger hasn't closed by that date, WPP or Grey could walk away from the deal, subject to certain conditions.

European operations
WPP and analysts have not expected the deal to have trouble getting antitrust clearance. WPP generated 41% of its $6.7 billion revenue last year from European operations (including the U.K.). If it had owned Grey last year, Europe would have accounted for 42% of WPP/Grey's combined $8 billion revenue.

Stock traders have ignored the antitrust review, betting the deal will close without problems. In U.S. trading, WPP stock late this morning traded at $54.36 a share, just one cent below its price before the European antitrust issue arose last month. Grey shares this morning traded at $1,083, unchanged for the day. Based on WPP's price today, its purchase of Grey for cash and WPP stock has a value of $1.65 billion, or about $1,094 for each Grey share.